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- Robert Bell
Financial Promotions
The FCA has published guidance on the use of social media in financial promotions. The guidance is timely; more and more businesses are using social media to reach a wider audience and use innovative ways to communicate their products. The FCA has been concerned that some of these promotions are not in line with its requirements and as a result, could lead to significant harm to consumers. They have particular concerns around the promotion of complex products and services, or those that include inherent risks that may not be clearly balanced with the apparent benefits of the product within the promotions.
The guidance is written in light of the Consumer Duty, and helpfully highlights how and why the Duty impacts on financial promotions. It also offers a timely reminder that firms are responsible for the compliance of every financial promotion they make and publish and remain responsible for regulatory compliance where they work with influencers.
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The FCA have stepped up their oversight of financial promotions in recent years, underpinning just how much the regulator is concerned about the potential harms. In 2023, over 10,000 financial promotions were withdrawn or changed, “an increase of 17%, year-on-year.” This is bound to continue this year, with the 2024/25 business plan stating that they will use new sources of data to quickly act against firms approving and issuing non-compliant financial promotions.
The FCA have been concerned about the use of social media and of influencers to promote financial products for some time, particularly where the nature of the medium encourages firms to concentrate on visuals and engagement rather than on the information customers need to be able to make an informed decision. The guidance does emphasise that any form of communication is capable of being a financial promotion. The key aspect is that it includes an invitation or inducement to engage in investment activity. The term ‘investment activity’ is wider than the commonly used definition; for financial promotions this includes any financial decisions or actions related to regulated financial products including spending, saving, lending or borrowing, as well as typical investments.
For social media influencers, there’s the danger that in a highly regulated industry like financial services, influencers who don’t have a background in the complex regulatory framework could be more likely to miss out key information, focus on presenting a single view of the product, and aim to “sell” rather than to inform and ensuring a balance of the benefits with the risks. Adverts – via whatever channel – must be fair, clear and not misleading and present a balanced view of the risks and benefits. If prescribed risk warnings are required, they must be clear and prominent to support consumers in making well-informed financial decisions.
Firms that use social media and influencers will need to consider:
How their affiliates communicate those financial promotions
Training and supporting affiliates to understand what is required under the regulations, including that unauthorised persons promoting regulated financial products without approval from a s21 approver may be committing a criminal offence
Building and using monitoring and oversight systems to ensure affiliates are compliant when communicating financial promotions.
The nature of social media makes bias in favour of the product much more likely within the promotion itself. But all firms that communicate or approve financial promotions can take something from this publication. The FCA points out that their financial promotions rules are ‘technology neutral’ and although the guidance offers practical advice for social media promotions, there are lots of useful points for all firms, particularly around the impact of the Consumer Duty. Reviewing compliance with the Duty is a must – Principle 12 and PRIN2A apply to financial promotions whether the firm has a direct relationship with the customer or not, so this includes financial promotions approvers.
Navigating the rules and guidelines for financial promotions can be tricky, especially with the FCA stepping up their oversight. Our credit lending course guides staff at all levels through the requirements, bringing those complex rules to life. Priced at just £20 a head, training is online, accessible for staff at any time with content able to be reviewed and revised by the user at any point during the span of their enrolment.
